Warren Anderson earned McDonald’s trust doing it his way

Warren Anderson did not have a lot of support from his team at The Anderson-DuBose Co. to build a new distribution center in Lordstown. The move would be quite disruptive, taking the food and beverage distribution company’s two locations in Solon and Pittsburgh and combining them into one facility that was roughly in the middle.

“The new center was going to be significantly further for a lot of employees to get to,” Anderson says. “So there was a lot of pushback, just from a lifestyle standpoint.”

It was a move that absolutely had to be made, however, to preserve the future of the company, Anderson says. The plants in Solon and Pittsburgh were both 30 years old with mammoth freezers that had become very costly to operate due to their energy inefficiency.

The setup of the buildings was also a concern as it created logistical problems moving product in and out of the space. A new, modern facility would recoup the cost of construction by boosting efficiency and creating the capacity to take on more business.

“Our customers were facing more and more competition and we couldn’t just keep passing on price increases to them,” Anderson says. “We were getting to the point where we were not going to be competitive.”

The $28 million, 158,000-square-foot facility that opened in 2012 was certainly a huge expense. But it quickly proved to be worth every penny.

“It was more expensive, but we’re making more money,” Anderson says. “Sometimes growth can come from just figuring out ways to operate your business more effectively and efficiently.”

While there were hiccups along the way, Anderson found a way to complete this critical project, maintain a strong culture and pave the way for his company’s continued growth.

“Back in the early ’90s, I would stress my managers out because I was fearful,” says Anderson, the company’s president and CEO. “I had a lot of debt and everything was new. I was basically running from crisis to crisis. Almost 30 years later, I can’t say I’ve seen it all because I’m always getting new challenges that are unbelievable. But it takes a lot to rattle me now. I’m calm under fire.”

Chart your own course

Being an entrepreneur was not Anderson’s first choice as a career. He wanted to work in media and was a big fan of Ed Bradley, the long-time host of the CBS News TV show, “60 Minutes.” He became an advertising executive, selling air time on radio and TV and rose to become second-in-command at a CBS affiliate. Unfortunately, he didn’t see eye to eye with his boss and was fired from the job.

“I was around 36 and it was it was a very, very painful experience because I viewed myself retiring in that industry,” Anderson says. “It was so painful that I thought, ‘I am never going to work for another person who can come in and possibly destroy my life and my livelihood.’ I decided I was going to buy a business or try to start a business and that’s where it all began.”

Anderson was intrigued by the distribution and logistics sector and approached McDonald’s with a proposition: He and his business partner from college, Steve DuBose, would work for almost nothing as they learned how to operate a McDonald’s distribution center.

If they proved themselves worthy, McDonald’s would allow them the opportunity to purchase and operate a facility of their own at the end of this trial period. While it was a necessary step to reach his goal, it was also very stressful.

“We would borrow money on one credit card to pay off another and ask friends and family for money,” Anderson says. “It was a miserable time.”

The hard work and sacrifice ultimately paid off. On Nov. 1, 1991, the duo closed a deal to buy the unit in Solon that would become the foundation for The Anderson-DuBose Co., which has since grown to provide supplies to more than 500 McDonald’s and Chipotle restaurants in Ohio, Pennsylvania, New York and West Virginia.

“It wasn’t just intelligence,” recalls Anderson, looking back at this pivotal moment in his career. “There are so many more people smarter than me. It was hard work, luck and divine providence.”

Get it done

Anderson admits his approach to dealmaking is less refined than that of many entrepreneurs.

“I’m kind of like a cowboy,” he says. “I went after stuff and if I could buy it and if I thought I could make money and pay down the debt, I did it. I’ve read stories about great minds and great strategies in dealmaking. I didn’t really have that.”

Whatever his approach to dealmaking, Anderson understood the value of living up to the terms of any deal that you make.

“It was a multiple against the EBITDA of the company, which I think at that time was six and a half times EBITDA,” Anderson says of the deal that got him into business with McDonald’s. “The company that sold us this first unit was willing to guarantee the debt so that we could get traditional bank financing. We put up a certain amount of money and then the selling company also took paper back. We had a five-year note to pay back.”

While things didn’t work out between Anderson and DuBose, leading to a buyout in 1993, Anderson was able to pay off the debt in just three years.

“You have to really be able to harness your skills,” Anderson says. “You need to have a strong commitment to finish. That sounds so trite, but that’s what it takes. You have to persevere.”

In the mid-1990s, Anderson made a pitch to McDonald’s to set up their South African distribution for restaurants that they were going to be opening up in the country. He opened distribution centers in Johannesburg, Durban and Cape Town, then acquired Chipotle distribution rights for Ohio, Pennsylvania and West Virginia in 1998 and bought a second McDonald’s distribution center in Pittsburgh in 2007.

“We looked at things and we understood where we could add value and where we could be profitable,” Anderson says. “We tried to stay in our lane, which was distribution, whether it was food or beverages. So I would say for my company, our success has been we’ve been narrow in the kind of businesses that we look at. We knew what we were doing in our space.”

Believe in your plan

The facility in Lordstown has paid huge dividends for Anderson-DuBose. The company typically has between $4 million and $5 million in inventory which it turns over in about four days, Anderson says. The biggest challenge was overcoming a 60 percent employee turnover in the consolidation.

“We paid folks that had the furthest drive and provided bonuses to cover their fuel and additional time knowing that we really wanted a win-win situation,” Anderson says. “I didn’t want anyone to get hurt and I think my associates in both centers knew that. The way we structured it was if you come to the new center, I’m going to pay you a bonus that will give you time to look for a job.

“You’ll be further ahead financially and you’ll have time to migrate to another job. That worked out. Everyone that didn’t want to commute ended up finding something closer to home. I was able to have time to replace those people and keep the business running.”

While Anderson was confident he was doing right by his people, he still had to have faith in his plan.

“The only doubt, if I had a doubt, was were our projections accurate?” Anderson says. “I thought maybe we missed something. There are fuel costs, land costs, building costs, project delays. There were just so many different dynamics that I worried about. Had we forecast correctly?

“I approached that with the same kind of focus that I did when I first tried to get in the business. You have to know that what you’re doing is the right thing to do for yourself and in this case, it was really right for the business.”

A year after moving to Lordstown, Anderson bought a distribution center from Golden State Foods in Rochester, New York which at the time, supplied 220 McDonald’s restaurants. Anderson-DuBose is obviously very reliant on McDonald’s and Chipotle for its business, which could become a problem if anything were to happen to either of the restaurant chains.

“The advantage is I’m not out selling,” Anderson says of his business model. “I mean I don’t have a sales force, which is a real advantage. McDonald’s and Chipotle both believe in long-term supplier relationships. They are monopolies.

“On the other hand, our margins are probably lower because we operate with an open book arrangement. And if for some reason we failed in service or if they decide they want a different regional vendor, I’m in trouble. That’s one of the reasons why I bought the beer distributorship, to have diversity in my business.”

Anderson is a shareholder in Capital Distributing, a beer distribution center in Oklahoma City, Oklahoma.

“It’s smart to continue to grow, but we truly are a high-performing company,” Anderson says.

“I’m not saying that just based on my own self-inflated worth. We get measured in any number of categories from all of our customers of how I do against my competition and we’re always at the top of the charts in terms of productivity and usually very competitive with pricing. As long as we perform at the level that we’ve been performing, I feel pretty confident. But yeah, I’m still looking.”

The Anderson File

NAME: Warren Anderson

TITLE: President and CEO

COMPANY: The Anderson-DuBose Co.

Education: Bachelor’s and master’s degrees, University of Michigan.

Anderson on being an entrepreneur: Most people do not hit it out of the ballpark with one skill set. If you have 10 traits, you figure out how to harness maybe six of them. So you’re not the best at something, but you’re damn good at packaging the things that you are good at. My advice to beginning entrepreneurs is to really learn what you’re good at and play to your strengths.

Anderson on employee retention: We have a culture of treating our employees fairly and being consistent. We have unions, but we also have staff that’s not union and we treat all our people the same way. We have good pay and a Cadillac benefits package. So if a person wants to raise a family, we pay well enough that it’s more than a living wage. A person can stay here and really have a career and support a family and be treated with respect. We find that helps set us apart from a lot of the other companies.

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Warren Anderson

President and CEO, The Anderson-DuBose Co.

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